Bid-ask spread
Also called: spread · bid/ask spread · bid-offer spread
Definition
The bid-ask spread is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for an asset at a given moment.
How bid-ask spread works
If the best bid for a coin is 99.90 USDT and the best ask is 100.10, the spread is 0.20 USDT, or about 0.2 percent of the price. When you buy with a market order you pay the ask; when you sell you receive the bid. A round trip with market orders therefore costs you the spread on top of trading fees.
Spreads are tight on liquid pairs such as BTC/USDT on major exchanges, often just one tick wide. They widen on small coins, during fast-moving news, in quiet hours and on platforms with little liquidity. Market makers earn part of their income by quoting both sides and capturing the spread.
Instant buy or convert screens often hide the spread inside the quoted price instead of showing a separate fee. Compare that price with the order book mid price to see what you are really paying. Using limit orders lets you avoid crossing the spread, at the risk that your order is not filled.
Example
Suppose a small altcoin shows a best bid of 0.4950 and a best ask of 0.5050 USDT. The spread is 0.0100, which is 2 percent of the 0.50 mid price. If you buy 1,000 USDT worth at the ask and immediately sell at the bid, you would get back about 980 USDT before fees, a 20 USDT loss from the spread alone. On BTC/USDT the same round trip might cost a few cents.
Common mistakes
- Ignoring the spread and counting only the trading fee as your cost.
- Using an instant buy screen without comparing its price with the order book.
- Trading illiquid coins with market orders during volatile news when spreads widen.
Learn and practise
FAQ
What is a good bid-ask spread?
On highly liquid pairs it can be a tiny fraction of a percent. On small coins, spreads of 0.5 to 2 percent or more are common, which makes frequent trading expensive.
Why does the spread widen?
Spreads widen when liquidity is thin, volatility is high or market makers pull their quotes, for example around major news.
How can I avoid paying the spread?
Use limit orders at your chosen price instead of market orders, accepting that your order may not fill.